With expanded Azure licensing options from Microsoft, some enterprises moving workloads to the cloud won't have to repurchase software they already own.

The cloud ethos is about using services that abstract the operating details from the user -- and that includes software licensing. However, as organizations migrate to the cloud, they don't always use it in its purest, fully abstracted form, treating it instead as remote virtual server farms.

In this case, installing, operating, monitoring and licensing the software stack falls onto the cloud user, not the cloud provider. But the licensing aspect can create major headaches if organizations think they can just transfer existing licenses to a new machine.

As the purveyor of many enterprise software licenses, Microsoft felt the backlash when customers objected to repurchasing software they wanted to move from on-premises systems to Microsoft's Azure cloud. In response, Microsoft offered License Mobility, a program that lets organizations use existing licensing agreements when they move to Azure. Initially, the program was only applicable to select products and license holders, but has since expanded -- and spurred a number of new Azure licensing options.

The effect of Microsoft License Mobility on Azure licensing

Microsoft's present cloud licensing philosophy is to treat Azure the same as on-premises infrastructure -- at least for its bigger customers. Under the Microsoft License Mobility through Microsoft Software Assurance (SA) program, organizations with Microsoft Volume License agreements can deploy eligible server applications on Azure without purchasing new licenses or incurring mobility fees. Eligible organizations must have an Enterprise Agreement, Microsoft Enterprise Subscription Agreement or Microsoft Open Value Agreement, where SA is included.

The Microsoft license transfer program initially covered major enterprise applications, such as Microsoft SQL Server, SharePoint, BizTalk and Remote Desktop Services. Microsoft license holders had two options: either obtain a software image from the Azure virtual machine (VM) marketplace and pay the per-minute rate of the respective service, or upload and install their image and use License Mobility to avoid all but the VM usage costs.

The program expanded in February 2016 to include Windows Server. The key changes to Azure licensing include:

Organizations with a volume Windows Server license via SA can now apply these licenses to Azure VMs, not just their own servers, meaning they don't have to pay the Windows uplift on Azure. This results in the 33% discount. For example, A3 instances with 4 cores, 7 GB of RAM and a 285 GB disk have rates that go from $0.36 an hour to $0.24 an hour. The discount increases to almost 50% for high-end optimized compute D4v2 instances.

Deployments are limited to two instances with up to eight cores, or one instance with up to 16 cores, charged at the base Linux/unlicensed compute rate. For example, if you're using next-generation D-series instances that's two D4v2 or one D5v2.

Microsoft also introduced a pre-purchase plan with discounts up to 63% on standard VM rates when users pay for 12 months of a particular instance upfront. The actual discount varies by instance type, size, region and OS. Although conceptually similar to Amazon Web Services (AWS) Elastic Compute Cloud (EC2) Reserved Instances, Microsoft makes no mention of reserved capacity. Available capacity probably isn't an issue, given Azure's scale and track record of delivering instances on demand. But for organizations willing to prepay and that need rapid deployment of idle instances, check with your Microsoft representative on the SLA details.

Unlike Azure's program, AWS allows partial payment versus all up-front for a lower discount, and lets users reserve an EC2 instance for one or three years for a steeper cut. Both AWS Reserved Instances and Azure's pre-purchase plan are designed for steady-state, predictable workloads for which you can reliably predict demand for at least a year.

Microsoft provides a full list of server software supported on Azure VMs.

Azure licensing recommendations

These changes to Microsoft's Azure licensing model pertain to organizations using Azure as an extension of on-premises virtual servers. While this is a perfectly valid use of cloud services, IT organizations should look beyond virtual servers and consider application services. Don't move an on-premises VM to Azure if you can meet your needs by using a packaged Azure service.

Most organizations are better off using the higher level database or software as a service offerings, such as Office 365, Exchange Online or SharePoint Online, instead of running private instances in the cloud. These obviate the need for license management, and handle day-to-day operations, updates, security patches and monitoring.

Enterprise license holders that want to move workloads to Azure must apply for the Microsoft License Mobility program and ensure they're qualified for significant discounts off standard Azure rates. Don't assume that you can move Windows or application images to Azure without first verifying that your enterprise agreement includes license transfer benefits.

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